Money Talks Report 11/March/2025.

Market Report

???? Last week's market close was traumatic. Trade in the Chinese economy declined; although the trade balance exceeded expectations, this was only because imports fell much more than exports, which in both cases were lower than forecast. This reflects, once again, the weakness of domestic consumption in China.

?? Furthermore, the inflation data published in the early hours of Monday morning show clear signs of deflation in the Chinese economy, possibly attributable to an excess of supply combined with weakened demand due to lower consumption.

???? On the other hand, the US employment report showed a slight upturn in the unemployment rate, which rose to 4.1%, exceeding expectations. However, non-farm payrolls (NFP) turned out to be lower than expected, partially neutralising the impact of the rise in the unemployment rate.

?? In any case, markets seem to be more affected by the trade war and geopolitical conflicts than by macroeconomic data.

?? Yesterday, in its worst session since September 2022, the S&P 500 fell 2.7%, the Dow Jones Industrial Average fell 2.08%, and the Nasdaq Composite fell 4%. The Stoxx 600 index for all of Europe dropped 1.29%. Germany's exports decreased 2.5% month over month in January, according to preliminary data, which caused the country's DAX to drop 1.69%.

?? The "Magnificent Seven" tech stocks, once the stars of the bull market, led the declines, with Tesla, Alphabet, Meta, Nvidia, and Palantir all falling sharply. Treasury Secretary Bessent warned of a potential "detox period" for the economy as the new administration cuts government spending, and President Trump acknowledged the economy is going through "a period of transition."

??? In an interview with Fox News that aired on Sunday, Trump stated, "We want clarity." "Their clarity is abundant." Trump responded, "I hate to predict things like that," when asked if he believes a recession is near. "Look, we're going to have disruption, but we're okay with that," Trump later stated.

?? The dollar, which had been gaining in anticipation of Donald Trump's policies, has now started to decline as he imposes tariffs on his neighbours, and Tesla shares have halved since their post-election levels.

?? The New York Fed's Survey of Consumer Expectations showed inflation expectations a year from now rose slightly to 3.1%, while the projected level of inflation three and five years from now was unchanged at 3%. The Fed's target is 2% inflation. However, the survey found rising expectations for price increases in specific areas like food, rent, gasoline, college, and medical costs, as well as a 3.3% expected rise in home prices over the next year. The New York Fed president downplayed the significance of the rising short-term inflation concerns. However, the outlook suggests the Fed may face a difficult environment of rising inflation and a weakening economy, potentially arguing for opposing interest rate choices.

???? In UK, British consumer spending lost momentum in February, with retail sales growth slowing to 1.1% year-on-year from 1.9% in January. The British Retail Consortium (BRC) cited low demand for spring fashions and complaints about higher employer social security and packaging taxes taking effect next month as factors behind the weaker growth. The BRC warned that the industry may have to increase prices or reduce investment in jobs and shops to absorb the upcoming cost increases.

?? Euro zone finance ministers are concerned that the US administration's embrace of cryptocurrencies could impact the euro zone's monetary sovereignty and financial stability. President Trump's executive order to establish a strategic reserve of cryptocurrencies marked a policy pivot. The European Central Bank's creation of a digital euro is now critical, as the US's favorable stance towards cryptocurrencies and dollar-denominated stablecoins could lead tech giants to launch their own payment solutions, potentially affecting the euro area's monetary sovereignty and financial stability.

?? Europe's real interest rate margin nears zero after Thursday's rate cut, exposing central banks to challenges in controlling inflation. With rates close to inflation, savers lose purchasing power, risking weaker monetary policy impact and financial stability.

?? Made in US strategy: Automakers Volkswagen and Stellantis have confirmed that their vehicles made in North America will be exempt from the 25% tariffs imposed by U.S. President Donald Trump, while BMW says it will face the levies. The threat of import tariffs has raised alarm bells in Europe, as vehicles and machinery are the European Union's biggest exports to the United States, accounting for 41% of its exports to America.

Market View:

?? Worrying fall in the US stock markets, which continue to lose consecutive support day after day. S&P 500 futures fell below 5,600 points in the last few hours, although they are now showing an upward rebound, trading at 5,630 points. The Nasdaq has also suffered a spectacular fall, with its futures reaching a low of 19,200 points, before rebounding to 19,465 points at the time of writing.

?? Also noteworthy is the notable fall of the dollar, which has lost almost 4% so far this month. The dollar index (DXY) is currently at 103.60 points, which has brought the EUR/USD pair close to the 1.09 mark, now trading at 1.0875.

?? Meanwhile, European stock markets have fallen, although much less sharply than their US counterparts. Paradoxically, the correction is affecting the economy that was in a better position more severely. DAX 40 futures fell back to 22,435 points, but have rebounded upwards and are now trading at around 22,770 points.

??? The crude oil market continues to show weakness, with Brent crude approaching the $68 support level, currently trading at $69.45 per barrel.

?? On the other hand, gold futures experienced a momentary drop below $2,900, but have managed to recover in the last few hours.

? Finally, Bitcoin has continued its downward trend, reaching levels similar to those seen at the end of February, with $78,000 acting as technical support. However, it has now rebounded upwards, exceeding $80,400.

Geopolitics:

???? Germany's incoming chancellor, Friedrich Merz, faces a political test after the Green party initially rejected his plan for a boost to defense and infrastructure spending. Without the Greens, Merz lacks the two-thirds majority needed to change the German constitution and the EU's plans to take ownership of the continent's defenses. The Greens demanded tougher rules for defense spending, raising hopes for compromise. EU finance ministers will discuss gradually easing fiscal rules, but left-wing coalition parties are already speaking against higher defense spending in countries like Spain.

???? U.S. Secretary of State Marco Rubio arrives in Saudi Arabia to discuss a peace deal with Ukrainian officials.

???? Nicolas Dupont-Aignan, leader of the France Arise party, stated that the true threat to France is not Russia, but the risk of bankruptcy.

???? Violent protests erupt in Romania as over 100,000 people rally in Bucharest after the nationalist leader was barred from the upcoming May elections. The Constitutional Court had previously annulled December’s results, denying his victory, despite polls showing him with 45% support. His potential government’s opposition to the war in Ukraine could disrupt NATO’s plans for its largest military base in the country.

?? After the bloodbath against religious minorities, including Christians, by the Islamic troops that control Syria, the HTS, an interview with Trump in 2015 went viral, warned that the Syrian rebels armed by the Obama administration could be worse than Assad, a prediction that has sadly come true. "We have no idea who the other side is," said Trump.